One thing I don't see is the other side of this story: the sellers.
I don't get why sellers are selling to PE. Can these services not "IPO"? Why do these companies need to sell?
When PE takes over medical practices, my understanding is there just isn't enough capital available for a dentist to "cash out". The options are either they find another dentist to buy it, the close the practice, or they sell the private equity...
How is local doctor's office going to IPO? An IPO is just selling to the public instead of a private buyer. Not to mention the amount of paperwork and ongoing reporting requirements of actually IPOing.
Talking to a single buyer is easier than arranging an IPO and I would imagine the diligence far less onerous.
My friends, whose parents own wealthy businesses were not well set up to take over those companies.
Some finished college and went back to work for their parents, but the dad told them “no, you can have a job within my company, but I’m not gonna hand it to you because I’m still young and you know only 25 years ahead of you in life.” In china they say, “when the grandfather dies, the children prosper.”
The kids either stayed working for their dad, giving him additional agency over their lives as he controls their career, or the kids left to go start their own business within their means using his funding.
Other kids just have no interest in their parent’s industry. They decided not to be a dentist because they like art more. They don’t wanna run a landscaping company, they would rather work for Google in an air-conditioned office and a 40 hour week job.
Out of the gate you need $27.5m in cash flow with $2.2m in profit. I doubt there are many single practice dentists doing that kind of volume.
You can’t just IPO because you want out of the business. There’s lots of reporting and regulatory requirements to ensure you aren’t screwing investors.
In the past farmers needed COOPs in order to make their products/the local community's economy viable. Today we need something like COIVs (community owned investment vehicles). Kiva for the rest of us I guess.
I'm trying to be generous here... but prisoner's dilemma says the people in a community are probably better to park their money outside of the community in order to protect (and grow) their retirement investments.
Yes, it would be better for the community if people chose to invest locally instead of the SnP 500, but running out of money in retirement is a very real fear and the SnP500 is much better/safer for most people than COIVs.
> I don't get why sellers are selling to PE. Can these services not "IPO"? Why do these companies need to sell?
Shifting private ownership to a publicly traded company is an awful lot of paperwork (especially for accounting) and upfront costs, you need to time it properly, you need to find banks willing to cooperate.
In contrast, selling a private company to a PE is a pretty much straightforward transaction.
My understanding is people don't like the PE / LBO with a single investor, because it loads the company with debt that it pays back via cutting quality and service offerings.
My assumption is publicly traded company would have access to better financing terms and a diverse set of investors with less "hunger" the financial shenanigans the PE investors have.
Totally agree - but I guess I was getting at is that largest mfg. per the article is a a public company, and the number two is private equity, would we think that there would be a meaningfully different dynamic if they both were public?
I think it's totally appropriate to hold it against them if they knowingly sell out to scumbags. Society used to look down on selling out. We wrote songs about it. But in 2026 it is glorified.
You're 55, making $400k a year as a HVAC Repair Company, and while you love the business and your kids are in expensive colleges (not taking over the business) you are offered $8MM to sell. Instant retirement. A buy out isn't the same as selling out because people live off of cash and not principal.
At the end of the day it comes down to how much money your principles are worth. People are commenting about dentists and doctors being bought out. Those strike me as the kind of people that can afford retirement without also contributing to the worsening of society.
What do you think they should do? Who are they holding out for and for how long can they hold out? Retirement is a financial situation and an age. Do they shutdown the business when they are too old to function as an owner?
My friend's parent's local services company shutdown when they didn't find a buyer. A business limping under interest payments IMHO is better than a complete shutdown.
I get this is sarcasm but... meanwhile the founders/great thinkers on free markets wrote extensively on how free markets REQUIRED strong government and strong government oversight.
